Bitcoins/Litecoins/Virtual Currencies

Sanrith Descartes · Oct 24, 2019

hory said:
Just curious, why didn't you sell when they had been above 18K? Do you think they will ever reach that high again ?

HODL

Control · Oct 25, 2019

AladainAF/IRS said:
A1. Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, and a medium of exchange. Some virtual currencies are convertible, which means that they have an equivalent value in real currency or act as a substitute for real currency.

That sounds like they want you to log the time and current value every time you loot a mob in a multiplayer game. I would normally assume that it would only apply to currencies that have an regulated/recognized market for conversion, but the second sentence basically says that it's a currency even if it isn't convertible. (I really hope some people log and report their mmo kills...)

AladainAF · Oct 25, 2019

Control said:
That sounds like they want you to log the time and current value every time you loot a mob in a multiplayer game. I would normally assume that it would only apply to currencies that have an regulated/recognized market for conversion, but the second sentence basically says that it's a currency even if it isn't convertible. (I really hope some people log and report their mmo kills...)

Correct, that's exactly what it sounds like which is absolutely ridiculous, so what do we put in the box?

I've been having discussions with my CPA, and he's extremely good on this stuff. He's not even sure. For the Linden Dollars, he wants me to be safe since its how my business makes money, but for everything else he's curious about it, because the way its worded, things like MMO gold can most certainly meet that definition.

HEre's their complete FAQ my CPA referred me to:

Frequently asked questions on virtual currency transactions | Internal Revenue Service

Frequently asked questions and answers about Virtual Currency transactions.

www.irs.gov

Control · Oct 26, 2019

AladainAF said:
Correct, that's exactly what it sounds like which is absolutely ridiculous, so what do we put in the box?

I've been having discussions with my CPA, and he's extremely good on this stuff. He's not even sure. For the Linden Dollars, he wants me to be safe since its how my business makes money, but for everything else he's curious about it, because the way its worded, things like MMO gold can most certainly meet that definition.

HEre's their complete FAQ my CPA referred me to:

Frequently asked questions on virtual currency transactions | Internal Revenue Service

Frequently asked questions and answers about Virtual Currency transactions.

www.irs.gov

Ya, crazy vague language. I read through it expecing to find the "but not your wow gold" clause but never saw anything like that. On the other hand, that should technically also make some activities/costs involved with in the accumulation of the currency deductible as well, though I didn't read all of the basis-establishing subsections yet.

Brad · Oct 26, 2019

Sanrith Descartes said:
HODL

Topic: I AM HODLING (Posted by GameKyuubi)

I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e. GF's out at a lesbian bar, BTC crashing WHY AM I HOLDING? I'LL TELL YOU WHY. It's because I'm a bad trader and I KNOW I'M A BAD TRADER. Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro. Likewise the weak hands are like OH NO IT'S GOING DOWN I'M GONNA SELL he he he and then they're like OH GOD MY ASSHOLE when the SMART traders who KNOW WHAT THE FUCK THEY'RE DOING buy back in but you know what? I'm not part of that group. When the traders buy back in I'm already part of the market capital so GUESS WHO YOU'RE CHEATING day traders NOT ME~! Those taunt threads saying "OHH YOU SHOULD HAVE SOLD" YEAH NO SHIT. NO SHIT I SHOULD HAVE SOLD. I SHOULD HAVE SOLD MOMENTS BEFORE EVERY SELL AND BOUGHT MOMENTS BEFORE EVERY BUY BUT YOU KNOW WHAT NOT EVERYBODY IS AS COOL AS YOU. You only sell in a bear market if you are a good day trader or an illusioned noob. The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell.

so i've had some whiskey
actually on the bottle it's spelled whisky
w/e
sue me
(but only if it's payable in BTC)

Aldarion · Oct 27, 2019

Control said:
Ya, crazy vague language. I read through it expecing to find the "but not your wow gold" clause but never saw anything like that. On the other hand, that should technically also make some activities/costs involved with in the accumulation of the currency deductible as well, though I didn't read all of the basis-establishing subsections yet.

Thats what I'm thinking. If MMO gold has to be reported then arent the computer, the internet connection, and all the mountain dew you can drink deductible business expenses?

I suck at taxes and dont play MMOs anymore anyway. But its funny to think about.

LachiusTZ · Oct 30, 2019

Aldarion said:
Thats what I'm thinking. If MMO gold has to be reported then arent the computer, the internet connection, and all the mountain dew you can drink deductible business expenses?

No. It's IRC 183.

Hoss · Nov 9, 2019

Hell even the free diamonds you get from freemium games sound like they count. So w\hat happens if you check yes in that box? Is there further info required? Cause I guess I'm going to check yes and if asked disclose my gaming accounts.

a_skeleton_05 · Dec 15, 2019

Quadriga: Lawyers for users of bankrupt crypto firm seek exhumation of founder

Lawyers for Quadriga users say there are "questionable circumstances" behind Gerald Cotten's death.

www.bbc.com

Oblio · Jan 7, 2020

LachiusTZ · Jan 12, 2020

Iirc, for currency there needs to be some fluidity (can you sell your in game gems for $$$$?), and a reasonable person would have to know it has value.

Thats how the "Is this the thing / Does it apply and meet standards".

Anyone here mining? Read a few pages back and didnt see much.

I kinda want to accumulate some of these currencies, but dont want to buy them. Kind of my quirk. So looking around and found various estimates of the break even on a decent rig. Looks like its going to require enough of a buy in that I would be better off just buying the coins, but like I said its a fucking quirk so I kind of want to do it anyway.

AladainAF · Jan 15, 2020

Control said:
Ya, crazy vague language. I read through it expecing to find the "but not your wow gold" clause but never saw anything like that. On the other hand, that should technically also make some activities/costs involved with in the accumulation of the currency deductible as well, though I didn't read all of the basis-establishing subsections yet.

So my CPA called to tell me to be on the lookout on this, and it's his opinion that game currency most likely can fit this definition. Given the penalty is extremely severe for lying on that check box, it might be better to be safe than sorry?

The IRS updated their definitions some. Reminder, the IRS defines "Virtual Currency" as:

IRS said:
Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, and/or a store of value. In some environments, it operates like “real” currency (i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance), but it does not have legal tender status in the U.S. Cryptocurrency is a type of virtual currency that utilizes cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain, DAG, or Tempo.

Virtual currency that has an equivalent value in real currency, or that acts as a substitute for real currency, is referred to as “convertible” virtual currency. Bitcoin, Ether, Roblox, and V-bucks are a few examples of a convertible virtual currency. Virtual currencies can be digitally traded between users and can be purchased for, or exchanged into, U.S. dollars, Euros, and other real or virtual currencies.

My CPA says that the IRS can make a compelling argument that any game currency has an equivalent value in real currency, because of RMT sites, etc. Notice they state Roblox, and V-Bucks (Used by Fortnite).

I have an article my CPA referred me to which is pretty clear, if you're caught cheating and don't check that box that can get you criminally charged. They seem to be pretty damn serious about this, so make sure you're all good!

Article said:
The IRS recently released a draft 2019 Form 1040 containing a question targeting cryptocurrency. A checkbox on Schedule 1 requires taxpayers to answer whether at any time during 2019 they sold, sent, exchanged or otherwise acquired any financial interest in cryptocurrency.

The Department of Justice Tax Division has successfully argued that failure to check a box, in the context of reporting foreign bank accounts, is per-se willfulness. Willful failures, as opposed to non-willful actions, carry higher penalties and a greater threat of criminal investigation. The Department of Justice Tax Division is working with the IRS, is already involved in several criminal prosecutions involving cryptocurrency and warns that others are coming. The IRS Criminal Investigation Division is also meeting with tax authorities from other countries to share data and enforcement strategies to find potential cryptocurrency tax evasion.

Article said:
Also, there is no “de minimis” exclusion. Meaning, every transaction involving digital currency must be reported. What about a purchase of a cup of coffee with crypto cash? This payment gives rise to a taxable exchange. The value of the coffee you just bought less the basis in your currency you provided must be computed and reported to the IRS as a gain or loss.

LachiusTZ · Jan 15, 2020

Lol

Get a new CPA

Ravishing · Jan 15, 2020

How is a game currency convertible?
Just cause there's a black market for some of it?
Vbucks can't be traded unless you sell your entire account.
Same with most games.
Maybe WoW coins (or any MMO currency) could qualify since you can trade them in-game and put them on a black market easier.. idk.

I'm not checking the box just cause of gaming currency.

I can't remember if I even made a crypto transaction in 2019, I've been holding for years.

AladainAF · Jan 15, 2020

Ravishing said:
How is a game currency convertible?
Just cause there's a black market for some of it?
Vbucks can't be traded unless you sell your entire account.
Same with most games.
Maybe WoW coins (or any MMO currency) could qualify since you can trade them in-game and put them on a black market easier.. idk.

I'm not checking the box just cause of gaming currency.

I can't remember if I even made a crypto transaction in 2019, I've been holding for years.

The IRS specifically called out V-bucks. Are you saying they are just dumb and don't know what they are talking about? They probably are, but why would they call out v-bucks specifically?

LachiusTZ said:
Lol

Get a new CPA

My CPA is recognized as one of the most knowledgeable CPAs in the country relating to Virtual Currency, which is why I have him, because my entire business is run off virtual currency. He also teaches at Univ of Texas, and has seminars around the world concerning this topic. He knows what he's talking about. He's not saying "check the box". He's saying "the IRS can make a good argument that game currency meets this standard, checking the box might be safe than sorry". In my case, though, there's no question to check the box.

LachiusTZ · Jan 15, 2020

I just got off the phone with a local CPA about this exact thing.

There are some legal expectations that those items don't meet.

If your CPA would rather do as told than contest with a perfectly reasonable position, he is a weak rep at best.

Everything is relative, and you are more exposed than most.

But the position the service has taken is untenable. And the virtual currency part is eventually going to get beaten.

As an aside, we got a video earlier from Rettig and the sbse guy.

Neither of them even understand the problem (with reference to civil referring to criminal), much less have a solution.

Edit:

AladainAF not saying don't check the box, I'm saying that approach is wrong and a good CPA would contest it and have a valid position.

And the service has taken a position that is absurd

Keystone · Jan 15, 2020

It is just a box right? why bother contesting it, just click yes and move on with your life.

Khane · Jan 15, 2020

Keystone said:
It is just a box right? why bother contesting it, just click yes and move on with your life.

Because it isn't some meaningless survey and has very real, monetary ramifications? "Just a box". You can't be serious.

Arative · Jan 15, 2020

I've been holding 4 bitcoins for a couple of years, so I'll be taxed 15% when I sell it, right? If I liked them am I suppose to calculate the price each time I mined the small piece of the block?

I guess that's a problem for when I actually sell

LachiusTZ · Jan 15, 2020

Keystone said:
It is just a box right? why bother contesting it, just click yes and move on with your life.

You don't fully appreciate the admin requirement of all virtual currency being treated as an asset and calculating all gains and losses associated with it.

It's not even remotely possible

The correct stance in that instance, is to track it within reason, ignore the rest, and have a pre built set of case precedence to provide when / if audited

Criminal literally can do nothing to you if you do that. You do not fit the requirements for prosecution.

It's a non starter

Bitcoins/Litecoins/Virtual Currencies

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